Policy Talk, March 19, 2025
Erich Kirchler on the Psychology of Tax Behavior: Two Decades of Research at the University of Vienna.
As part of the Department of Public Policy’s Policy Talks Series, Professor Erich Kirchler, an expert in economic psychology, presented insights from two decades of research on tax behavior at the University of Vienna. His talk explored the intersection of psychology and taxation, focusing on how trust and power shape tax compliance.
Traditional economic models assume individuals act as rational utility maximizers, responding primarily to audits and penalties. However, psychological research suggests that tax compliance is also driven by trust in authorities, fairness, and social norms. Kirchler’s framework illustrates how the balance between power (enforcement) and trust (legitimacy) determines whether compliance is voluntary or enforced. While deterrence strategies like fines and audits can help prevent tax evasion, they may also lead to unintended negative effects, such as strategic avoidance behaviors.
A key theme of the lecture was the role of tax morale - the willingness of individuals to comply with tax laws. Attitudes toward taxation vary across groups, influenced by social justice perspectives, economic conditions, and business experience. Research shows that greater trust in institutions fosters higher voluntary compliance, whereas excessive enforcement without trust can backfire. Kirchler also highlighted the impact of tax complexity, which tends to benefit high earners and contribute to inequality.
The talk concluded by discussing policy implications: Should governments prioritize building trust or enhancing enforcement? The answer depends on context: Where trust is low, investment in trust is crucial, while in weak enforcement environments, strengthening power is necessary.
Text by Anna Dreimann, MA in International Public Affairs student
About Erich Kirchler (University of Vienna)